Strategic Plan for the Gradual Elimination of Property Taxes for the Town of Miami Lakes*

For your consideration by: Councilman Nelson Hernandez *The contents of this presentation is the intellectual property of Nelson

Hernandez and cannot be used or reproduced without express authorization.

• We are paying so that others enjoy Town amenities for free.

• Unfair to those that choose not to use Town services.

• Long wait times for Town services. • Town services are undervalued and

underutilized.

The Problem with Status Quo?

Bold Idea • Miami Lakes has fantastic services, parks and resources. • We need to market what we do best. • Attract South Florida residents to our community, but ensure

that they pay a fair price for the value they’re receiving. • Residents of Miami Lakes are being squeezed from all

directions. They should be in control of their money. • Very simplified version of the emotional argument – who pays

for who?

Utilization Rates of Miami Lakes Subsidized Programs

23% 26%

44% 50%

40%

70%

87%

74%

55% 50% 48%

55%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Average: 52%

Town Residents Pay For 100% for these Services Town Residents use 52%

How Are These Programs Paid For?

• Tax Roll: $2,469,202,655 • Current Millage Rate: 2.3518 • Ad Valorem Tax Yield: $5,516,717 • Residents pay taxes relative to the value of their

properties, not on consumption of services. • Property taxes account for 37% of Miami Lakes’

Annual Revenues

• The Town of Miami Lakes is not permitted to have pricing differentials between town residents and non-residents.

• Our Recreational System is being underleveraged, despite actual demand.

Town of Miami Lakes Return on Assets (ROA) Is a mere12.4%,

using $5.5 million as profit amount.

Programs Not Leveraged By Miami Lakes Residents

A Better Option

• Gradually replace the $5.5 million in revenues from property taxes with an alternative source. – Export Town operation costs. – Provide immediate property tax relief to residents – Restore local economic efficiency to our Town. – Current system susceptible to service shortages. – Provides wrong incentives.

We need a more equitable system for Miami Lakes.

Case Study: Stafford, TX

• Eliminated municipal property taxes in 1995 • Suburban municipality of Houston, TX • 7 square miles • Population: 20,000 • Median Household Income: $61,000 • Relies on sales tax and user fee revenue • Safe haven for senior citizens • Expected to pay off $2 million Bond debt by 2014 • Success comes from proximity to highways • Sound fiscal & tax policy management

Innovative Government Operations • Align Town operations with principles of

market demand and profit generation. – Determine which services can be profitable – Utilize $50,000 branding initiative to showcase the

Town. – Assess customer service aspects of our “retail”

services. – Necessary to compete with other municipalities.

Next Steps

1. Conduct an efficiency assessment to determine where Town services can be enhanced.

2. Determine fair value of services.

This same process has led the City of Hialeah Gardens Park System to exceed

$100,000 in profits.

Replacing Property Taxes with Profits

Current Millage Rate: 2.3518 Hypothetical Profits for FY(t-1): $2,000,000

Tax Roll: $2,469,202,655

= 0.80998 (Millage Savings)

Next Fiscal Year(t), our Millage Rate will be: 2.3518 – 0.80998 = 1.5418

34% Property Tax Reduction

Current Millage Rate: 2.3518 Hypothetical Profits for FY: $2,000,000

Tax Roll: $2,469,202,655 Property Tax Yield (t-1):

$5,516,717

$2,000,000 $3,516,717 0.80998 mills 1.5418 mills*

*This millage rate is variable

Replacing Property Taxes with Profits

The Big Picture

Town

Residents • Profits will be passed to Miami

Lakes residents in the form of increased equity towards their homes.

• Lower taxes result in higher demand thereby increasing property values.

• Residents will not be penalized for choosing NOT to use Miami Lakes public services.

• Exempt Miami Lakes residents from any fees who are below the Federal Poverty Line

• Operating as a business will incentivize the delivery of better services.

• Low Demand services will be streamlined (Free Market Oriented).

• Miami Lakes will be the first municipality in Florida to move in the direction of Consumer Empowerment!

• Funds would be more liquid since there would be less risk of default on collecting from property liens